Update from Bitcoin’s Death Valley

Nine months into my Bitcoin Cloud Mining experience, I can tell you without a doubt that it’s turned into a real crock of shit. There is no other simple way to describe how off the rails all of this is going.

Where to start? Well, difficulty is off the chart, and as such, the gross income from my 2 TB/2 of hashing is really low. Yesterday was 0.00007381 BTC or about 48 cents. As the “Maintenance fee” is 70 cents, I make nothing. It’s been like this for months now. It’s interesting that they suspended the contacts (turned off the machines) a few months back, and then turned them back on. My assumption is that they make enough at 24 cents per TB to pay the bills and build up their bitcoin banks. I have a feeling they are playing long.

Second is that the income from two contracts over this time is net about $130 US dollars, on an investment of $290. This of course assumes that I can get my earnings out of Hashflare, which is another story. They have suddenly decided to play the tough rules set, and are applying a KYC (Know Your Client) rule set that includes having to disclose all personal info to them before they will release funds. This comes after a long period of time where they set the withdrawl minimums so high, nobody could get anything out of the system. Now they have abolished that, but set up the KYC rules. My guess is that a significant number of consumers will abandon their BTC with them and at some point, the tent will fold and all of those stored coins will pool up.

Third of course is the lack of progress in the BTC market (or any crypto for that matter). BTC has traded over a space between $6000 and about $7500 now for a while,there are occasional runs higher, but for the most part gravity seems to keep pulling it back. There are plenty of pump (and probably dump) artists out there push BTC $50,000 stories, but so far nobody is biting. Others are suggesting that most run-ups in price are speculators or shill bidders trying to trick people into pumping cash into a failing system. The reality seems to be that any time the price goes up, enough people are willing to dump their coins such that supply outstrips demand and the price drops. Since the percentage of coins actually being transacted is still very low compared to the total pool, there is a massive overhang of potential supply which can crush any boom market. Unless a bigger percentage of the total coins in circulation get traded, I don’t think it will change.

Quite simply, there are no longer enough buyers willing to snap up overpriced bitcoins to support a really high price. The current price is lower than most people can mine them for. It’s limited the mining down to certain groups, who have scale and equipment to keep mining at this price either profitably or without big loss. That won’t keep going, as the difficulty levels will keep going up and even they will be squeezed out. Moreover, there is the question of longer term viability. There is a smaller and smaller number of coins left to be directly mined, and then after that the system will rely on transaction fees (aka “gas”) to cover people’s cost of computing. It’s very likely at that point that almost every miner in the game will stop, the income will be so low.

With everything stacking up against it, I have sort of written it all off. $290 lost isn’t going to kill me, it’s just annoying to know that others in the chain are still making money while I am locked out.